The Federal Reserve took aim at the nation’s wobbly housing market last week with its biggest stimulus action in two years, but that firepower is doing little to lower mortgage rates or make home loans more available for Americans.

Instead, banks are set to see a windfall since the Fed’s actions will immediately lower the cost of issuing loans. It may take months or longer for benefits to trickle down to consumers, analysts say.

The emerging scenario highlights the limitations of the Fed’s ability to jump-start the housing market on demand: Rather than intervene directly with consumers, the Fed must rely on banks, brokers and other industry actors to offer borrowers better terms.

Banks say they are keeping rates high right now because lowering them any further would overwhelm them with customers. They say that over time, as volume thins out, rates could come down to attract new borrowers.

“Bank of America, Wells, Chase, whomever, have fixed capacity. You can’t take in more loans than you can handle,” said Matt Vernon, a senior mortgage executive at Bank of America.

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Housing rebound? Home prices rise in all major U.S. cities for second straight month

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Detroit’s home prices rose 6 percent in June from May, the biggest gain out of all of the major cities tracked by the Standard & Poor’s/Case-Shiller home price index. See how your city stacked up.

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Detroit’s home prices rose 6 percent in June from May, the biggest gain out of all of the major cities tracked by the Standard & Poor’s/Case-Shiller home price index. See how your city stacked up.

AtlantaHome prices in Georgia's capital rose 4.4 percent in June from May, the most recent month for which data are available. But home prices are down 12.1 percent from the same period last year.Mike Stewart/AP

Critics argue that banks are simply maximizing profits at the expense of consumers. Mortgage bankers are recording higher gains from home loans as the gap widens between the interest rate they charge consumers and the rate they must pay investors who finance the loans by buying mortgage securities.

Another challenge for the Fed is that many people eager to buy a home or refinance an existing mortgage simply can’t qualify because of poor credit histories. That may not change even if rates fall.

People “are seeing a dangling low fruit, but they just cannot reach it,” said Lawrence Yun, chief economist for the National Association of Realtors.

At a news conference last Thursday following the announcement that the Fed would begin buying $40 billion worth of mortgage bonds per month, Fed Chairman Ben S. Bernanke faced several questions about the significance of the central bank’s actions to the housing market.

Bernanke said that the initiative should “provide further support for the housing sector by encouraging home purchases and refinancing.” The chairman said “housing is usually a big part of the recovery process” but has been “one of the missing pistons in the engine.”

Yun said he believes the Fed was right to focus its latest round of stimulus at the long-suffering housing market, but it remains far from certain that the action will have meaningful impact.

Rates are already at generational lows, he said. Pushing them lower might spur some additional refinancing, but Yun said it is unlikely to create a new wave of home buyers.

Mortgage Bankers Association chief executive David Stevens expects even the refinancing boom to “burn out” since everyone who could qualify for a lower mortgage will have refinanced already.

To move that process along, banks are ramping up. Bank of America has added more than 800 people to its mortgage lending team to keep pace with refinancing applications. Vernon, the mortgage executive, said that as banks continue to work through backlogs of loans more quickly, they should begin offering consumers lower rates.

Once the refinancing activity dies out, demand for new homes will climb as borrowers gain confidence in the market, analysts say. The Mortgage Bankers Association is forecasting that loans used to purchase homes could increase by 20 to 25 percent.

Some regions of the country, which experienced only moderate price declines, are seeing a dearth of desirable homes for sale. Lower interest rates, therefore, may have little effect on boosting sales.

In Washington, the number of active listings in June reached a historic low, down 33 percent from a year ago. The result has been a wave of eager but frustrated buyers and a return of bidding wars, escalation clauses and offers to forgo requests for any repairs by sellers.

Wells Fargo senior economist Mark Vitner said he expects the Fed’s actions will give home builders confidence to build new properties in anticipation of demand.

“When Bernanke talked about giving a boost to the housing market, he was really talking about home building,” Vitner said. “Inventories are so low today and sales are growing that I think these actions are really meant to improve buying.”

Indeed, Bernanke said increasing home sales would provide the much-needed boost to the overall economy. “House prices are beginning to rise in some markets, which will encourage people to look at homes, will encourage lenders to make more mortgage loans,” Bernanke said. “So I’m hopeful that we’ll see continued progress in the housing market.”

Brady Dennis is a national reporter for The Washington Post, focusing on food and drug issues.

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